After several high-profile defaults, Beijing’s attempts to reduce risk in China’s $17 trillion credit market has led to a tripling in domestic rating downgrades in 2021, reported the Financial Times.
China’s unusually high corporate credit ratings and low default rates have long been a target for criticism from international rating agencies who have said it suggests a lack of transparency and an underlying presumption of receiving bailouts from the government.
Compared to 109 bond downgrades in the first four months of 2020, the same period in 2021 has seen 366. With the fallout from a series of defaults by state-owned companies still fresh, Beijing has taken a hardline stance against corporate malfeasance, with the vice-premier Liu He stating that there would be a “zero tolerance” policy from now on.
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